Promising Growth Rate in Housing Market Surpasses Pre-Pandemic Average

The summer of 2023 is expected to bring a robust housing market, potentially surpassing the activity seen last year. With rising prices and declining interest rates, many experts believe that mortgage rates will stabilize or further decrease, improving affordability for buyers. In our Tahoe and Truckee real estate markets, we anticipate continued high demand due to consistently low inventory.

The growth rate in the current market surpasses the pre-pandemic average, indicating progress in the housing sector. Market fluctuations are expected in the coming months, as home sales are significantly influenced by mortgage rates. The overall trend suggests a downward trajectory for mortgage rates, assuming inflation continues to ease.

A 2022 report by the Federal Reserve Bank of Dallas highlighted signs of a potential housing bubble. While sharp price increases alone may not indicate a bubble, it’s essential to consider other fundamental factors such as disposable income, credit costs and accessibility, supply disruptions, and rising labor and construction material expenses, all of which contribute to sustained real house-price gains.

It’s worth noting that market behavior can become detached from fundamental factors when there is a widespread belief in continued price increases. The fear of missing out can drive up prices and create expectations of substantial gains.

 

How does today’s market differ from the 2008 housing bubble?

Compared to the 2008 housing market crash, today’s housing market has tighter lending standards due to regulatory changes created in part as a result of the housing bubble of 2008. This means that those approved for mortgages now are less likely to default compared to the pre-2008 time period.

Unlike in 2008, where adjustable-rate mortgages (ARMs) were prevalent, today’s homeowners mostly have fixed-rate mortgages. Therefore, even if mortgage rates increase, existing homeowners will not experience changes in their monthly principal and interest payments.

Another significant difference is that a larger number of homeowners now have equity in their homes, which acts as a cushion during a downturn. In contrast, a significant portion of homeowners during the 2008 crisis had negative equity.

Recent data reveals that almost half of mortgaged residential homes in the United States are considered “equity-rich,” with loan balances secured by these homes at or below 50% of their property value. Moreover, borrowers have experienced a 7.3% increase in equity compared to the previous year, as reported by CoreLogic.

These factors demonstrate the differences between today’s housing market and the circumstances leading to the 2008 housing crisis, providing a more stable foundation for the current market.

 

How does this relate to the Tahoe and Truckee housing markets?

The national economy is an indicator for all housing markets. And with that there are fluctuations based on housing market regions and areas. Tahoe continues to be a sought after region, with persistently limited inventory. Real estate in Tahoe (homes, condos, land) continue to be a worthy investment as our area experiences heavy tourism and a desired lifestyle.